Friday, August 8, 2008

Friday Pot Luck

Another crazy weather day here. Rain, hail, and then sun followed by thunderstorms and more rain. It's like living in southern Florida here in Massachusetts! I blame global warming of course! Then I heard that Russia was invading Georgia and I thought that film "Red Dawn" was coming true! Turns out it is a former Russian republic. Right at the Olympics start huh Putin? New Russia, same as the old Russia.

Book List
In addition to the multitude of new Star Wars books out this summer that I will not bore you with, I picked up a couple of interesting looking titles you may want to check out. Up front when I say a book was a good read it means for the reasons I highlight. I am not vouching for the entire political position, religious beliefs, sexual behavior, or or issues any writer may have. I don't really care what their deal is, only if a piece they write offers insight I think is useful. So no messages about "I can't believe you agree with so and so" maybe I do and maybe I don't. See what the material I highlight is saying and that is all.

First up is "Reinventing Collapse" by Dmitry Orlov. This book chronicles the swift collapse of the old Soviet Union and extrapolates that to the USA. Think rapidly increasing trade deficit, crazy blow up of national debt, and public loss of faith in the government and you see many parallels. I am almost done this book, and while the politics are a bit much for me, the financial aspects bear analysis.

Second up is "World Made by Hand" by James Kunstler. This book is a fictional piece set against the technical book by the same author called "The Long Emergency". The end of oil access means many things and it looks like a good read. As a footnote, I have zero position on peak oil and all that so do not get excited.

John Edwards News
I mention the John Edwards affair news here not because of what he did (had an affair with a campaign worker, while his wife is dying of cancer) because I have zero interest in Mr. Edwards' private life. I offer it here in that the mainstream media had full and clear knowledge that he had this affair and chose to pretend otherwise. Democrats get a free pass from the media while Republicans are destroyed over even minuscule silly things (witness Trent Lott's demise due to a stupid comment taken wrong). I am no fan of Republicans, but when the press is so blatantly biased it pays to keep it in mind.

Fannie Mae to Stop Alt-A Loans
Fannie Mae is faced with an Alt-A loan book that is going south quicker than Paris Hilton, and in perfect form of a retard will NOW stop funding those loans. Class act those guys, right on top of things as usual. Hope that housing turnaround works for you in 2009, NOT!

Stock Market Now Adrift on the High Seas of Volatility
You get whiplash with these 250 point plus swing days on the DOW happening almost every day. This kind of wild swinging means nobody knows what the f#ck is going on, and do not listen to anyone that says they do. The markets are now fully unhitched to any real fundamentals (upside or down) and thus should be avoided unless for a real short term trade. Be careful out there and remember Minyanville's fight theme "It is the return OF capital, not the return ON capital" in a market like this.

Friday Night Entertainment
A new site I like for fun is found at, it is the Weird Universe site. This site rounds up weird (obviously!) news and pictures form all over and present s them to the audience. Good site overall. Today they had a piece on a megaphone out somewhere in Norway that you can call on the telephone and your voice will be broadcast over an empty meadow out in western Norway. Fun stuff, right?:

Comic Relief
Funny picture that reminds me of all those "Don't touch that button" lines from the James Bond films:
more cat pictures

Rock and Roll Ain't Noise Pollution
A classic song I really dig is "Break on Through" from The Doors. Great on many levels:

Another classic is Blue Oyster Cult and "Don't Fear the Reaper":

Final tune for the night. Take a listen to Meatloaf (and hot lady friend) and "Paradise by the Dashboard Lights":

Have a good night.


GawainsGhost said...

Meatloaf rocks.

Here's another book to consider. I just read a review of it in BusinessWeek. Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis, by Paul Muolo and Mathew Padilla. It tells a sordid tale.

I had an interesting day today. Got a whole slew of new assignments on repossessed homes, but one in particular stood out, so I did some research on it before heading out there. Get this.

Deed of Trust, July 2007. $275,000

Builder's and Mechanics Lean, January 2007. $50,000 in addition to contract sum of $201,537, which balance was renewed and extended in DOT in the original amount of $216,160.

Hmmm. Here's the information from the expired MLS listing. 4648 sf, 3-story, 4 bed, 4.5 bath, 4 living, 1 dining. On the market for 267 days, original list price $349,000, reduced to $299,000 prior to expiration.

It's now August 2008, and this house is already repossessed. So I wanted to see this monstrosity, mainly because of the listed improvements on the mechanic's lien:
Cabinets $3062
Rafa paint $8000
Trim/Install $5000
A/C and Electrical $10,000
Plumbing $1200
Illuminations $2000
Tile $2300
Granite $4000
Synthetic Marble Railway $10,000
Entry Door $1900
Mirrors/Shower Doors $1600
Plumbing Fixtures $1300
Laminate Floor $2500
Laminate Install $2649
Door Hardware $1000
Contingency $8539

Plus frames, slide door locks, and other knick knacks totalling $71,000.

So I got there, met the locksmith, opened the door, and wouldn't you know the house had been gutted. It has no kitchen. Cabinets, counters, vanities, mirrors, lights, door knobs, commodes, all gone. But they did leave the synthetic marble railway, which has to be one of ugliest, tackiest railways I've ever seen on a staircase.

I would say it would take at least $60,000 in repairs to get this house into marketable condition, because it's certainly not liveable now.

Oh, and it is a Fannie Mae. Any wonder why she's not making anymore Alt-A loans?

Pete Murphy said...

"... Think rapidly increasing trade deficit, crazy blow up of national debt ..."

Read on for another book to consider:

Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the weathiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, is now approaching $9 trillion. What will happen when those assets are depleted? Today's recession may be just a preview of what's to come.

Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.

Clearly, there is something amiss with "free trade." The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?

At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.

One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. In fact, our largest per capita trade deficit in manufactured goods is with Ireland, a nation twice as densely populated as the U.S. Our per capita deficit with Ireland is twenty-five times worse than China's. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one sixth of the world's population.

Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.

If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at where you can read the preface for free, join in the blog discussion and, of course, buy the book if you like. (It's also available at

Please forgive me for the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.

Pete Murphy
Author, "Five Short Blasts"

watchtower said...

Here is Nyquist's views on the current Russia situation:

Russia Invades Georgia
by J. R. Nyquist

"The Kremlin strategists already know that the global economy is headed for trouble. This means growing political weakness within the democratic countries."

"Already America has been weakened on many fronts. In strategic terms, this may be the perfect moment for Russia to break with the United States."

This was an interestng read, not saying that Mr. Nyquist has everything right (but who knows?, he might) but I'm firmly in the camp that believes that Russia will be trouble one day.

Anonymous said...

"Please forgive me for the somewhat spammish nature"

You got that right, kiss off bone head go pedal your ass on the corner.

Anonymous said...

Not to be weird or anything but something's wrong.

How did the dollar get it's recent upward velocity? So what now, did oil just get easy to find? Did gold and silver finally loose it's luster? Not to mention any geopolitical issues flaring up at the moment.

oh no wait....

it's nearing the elections....


PS: If anyone want to sell me your metals at these prices I will buy!

Anonymous said...

Found this great little gem.

Yup that about sums it all up!


Anonymous said...

Hey G man,

I be looking at maybe picking up a little of that silver under 12, gold under 680. I don't see much of a hurry as it is going to take awhile to base out after this rout.

Bet that guy that bought that silver from me at 21.50 is pissed.


Anonymous said...

Hey G man,

I be looking at maybe picking up a little of that silver under 12, gold under 680. I don't see much of a hurry as it is going to take awhile to base out after this rout.

Bet that guy that bought that silver from me at 21.50 is pissed.


Anonymous said...


Better get yours while your dealer has it in stock. My man is fresh out. There is a serious disconnect between the price and availability. The markets are upside down at this point. important notice:!

Please Note: Metal price changes are now based on closing prices at 5:15 PM NY time Mon-Fri. As a reference point Click for details.

IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.

Nice eh?

So K, if your buying let me know what you can get without paying mad crazy prices over spot.

Friday I had to settle for generic rounds and a south African 1/4 oz.

Good luck to everyone.


PS: Buy with both hands as I am close to my goal.

Anonymous said...


I ain't buying yet, credit is tightening, the dollar is rallying, there is a flight of safety into treasuries and with the price destruction that it is going to be several month before this bottoms and then I will probably trade the paper versus the physical. My son-in-law is dumping over a 100oz on e-bay to buy a couple of aces of land so if I wanted to buy I would buy it from him. I'm not selling but I'm not buying yet either. Silver target is now less the 11 having broken the 50% retrace level and gold somewhere between 730 and 644 and hopfully it stops there. This is a major shake out and there is simply no hurry to catch this falling knife.


watchtower said...

@ Kevin

I'm having trouble buying (actually no luck at all) silver at the spread that I once bought at when I started, do you think that this "silver contango" has started like some of the gold bugs are suggesting?

by Antal E. Fekete,

Or do you think that the gold bugs are ahead of schedule or maybe just wrong?
If you read the above article it says that silver would be first to widen the spread and then gold.
This seems to be what I'm running into, I can find gold at about the same spread but the silver has went nuts.
I assume from reading the post above that you are expecting demand destruction to close up the spread?
If you have time please read the article that I left a link to and tell me what your opinion of this guy (Antal E. Fekete) is, you made a good call with your selling of silver at $21.50 and I would like to have your thoughts on this before diving back into the silver trough.

watchtower said...

@ Kevin

Well I think I've mixed up my articles a little, here is the article saying that the spread (increase) between silver would be first:

"As a further refinement I call attention to the silver basis which, if my analysis is correct, will fall first. Not because monetary silver has been “consumed”, as trumpeted by the cheerleaders of the get-rich-quick crowd. It hasn’t. But, as the silver basis shows, silver is going into hiding even faster than gold. Why? Basically because central bankers have less scope for bluffing in the silver market. The cupboard is bare and the kitty is empty when they are looking for more silver."

by Antal E. Fekete,

Anonymous said...


It is my understanding that there is currently more demand then supply of the physical metal on silver. Will this continue? I don't know, silver is also a industrial metal. The problem as I see it is the massive de-leveraging going on, tightening credit spreed, rising unemployment, rising inventories of produced goods, falling asset prices, what appears to be a popped commodity bubble, and the banking system acting as a giant black hole that is sucking capital in but none is coming back out in the form of loans. I'm starting to think that we are headed into a deflationary spiral and that the gold bugs are early by a couple of years. I also am starting to wonder if even if as a gold bug you are right if you are buying now will that mean that the price of gold will be higher when everything is said and done if no one has any money to buy it from you other then government? What is going to drive the price up because a return to a commodity backed currency ain't gonna happen. This looks like it is going to be a global recession and not just isolated to the US. My son-in law got 17.50 on e-bay for that stuff he sold yesterday so there has been some price destruction in the physical as well.

Don't know if that helps much and I'm still not absolutely sure, but I'm sure enough that I'm not in any hurry to buy now.


watchtower said...

Thanks Kevin, I appreciate your views on these financial matters (not just PM's but everything).
I'll take your thoughts into consideration before diving back in, you make a lot of common sense with your assessment.